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Few things bother me professionally more than lawyers and law firms who seem to have the following business philosophy:

—First, take exceedingly large retainers up front.
—Second, churn the case for approximately 6 months by filing unfocused, fruitless pleadings and discovery.
—Third, withdraw from the case and file a fee petition against their former client for even more $$$.

We just got retained recently in a simple dissolution of marriage matter so I pulled the case file and took a look around. The previous firm filed the case some 9 months ago and took a $1,500 retainer up front. The case was filed and service was made on the Respondent; some 5 other court dates came and went; and, the firm withdrew with the case no closer to conclusion. Perhaps even worse was a matter against a gentleman who to my knowledge owes more past due child support than anyone in the state of Illinois. The firm brought several pleadings such as petitions for rule to show cause and motions to modify child support and visitation, never even got the pleadings they filed to hearing, then withdrew, and the last I saw had brought a $10,000 fee petition against their former client. It’s quite sad actually in much of my court-appointed contempt defense work, which is quite often procedurally post-divorce, the amounts of attorney fee judgments I see against former clients and the dissatisfaction of so many former clients with their attorneys.

What to do?

How about being a results-oriented attorney. How about starting with a specific end in mind and communicating with your clients specifically what you and her/his expectations are. Sadly I think these “lawyer churn” cases are almost the norm in the domestic relations field. Rule of Professional Conduct 1.5 disallows contingency fees in most domestic relations matters (child support collection being a notable exception). I suppose a contingency case for say custody of a child is rather unseemly, but some of my examples above aren’t exactly peachy either. Flat or capped fees? I’ve capped fees in some of the most common domestic relations matters like a motion to modify child support, for example. But in an early stage divorce it’s nearly impossible to gauge things like the opposing party/lawyer and the general tone of a case.

In my opinion at the end of the day you’ve got to create the personal policy of pushing your cases relentlessly towards settlement, hearing, and final resolution. And much of the pushing is about driving action BETWEEN court dates…that’s when the progress MUST occur. Waiting on those 15-minute court dates every couple of months is a recipe for disaster.

Well I suppose the only real way to do the above is to retire from the legal profession so please take the above headline with a grain of salt.

But I am constantly trying to alleviate some of MY clients’ “payment problems.” Part of my attempt to deal with “the problems” was to pick-up my copy of Ed Poll’s, The Business of Law, which I’ve owned for several years but hadn’t ever read. I don’t know Ed personally but I’ve been following him on Twitter (@LawBiz) for the last several months and I’m a regular participant in his LawBiz Forum. Ed’s background in helping lawyers become more profitable speaks for itself. I’m not through the entire tome as yet but I have been focusing on the several chapters in the section entitled Financial Management.

Some general things to check out are some of his financial forecasting tools and his two suggested methods for pricing legal services (his so-called Cost-Plus & Market pricings). An interesting factual nugget, “The average national accounts receivable cycle for lawyers’ services is 4.3 months.” Ugh.

But we want some action points to put dollars in your pockets, no? That’s what I need.

Here are 3 easy-to-implement billing/financial planning nuggets I’m thinking about and I’ll report back on the final implementation:

• Billing cycle change. My firm sends out client bills on a monthly basis. I’d guess most lawyers who are primarily involved with hourly billing sorts of matters send out monthly statements. For the 4+ year history of my firm we’ve closed our billing cycle on the last day of the month and then mailed bills to clients the first few days of the next month. The problem? The majority of our clients’ payments don’t come in until roughly the 15th-25th of the month. And this is often a problem because both within my business and personally I have bills that sometimes are dependent on client payments due at the start or middle of the month…and that’s a problem! My solution:  Change the end date of our billing cycle to somewhere in the early 20s day of the month and then mail bills essentially 7-10 days earlier than we’ve been doing. The goal being to move the client-payment-received window forward to the 5th-15th.

• Incorporate “Evergreen” Retainer deposits. With the exception of real estate transactions, we generally require a retainer deposit from clients up front which then gets billed against as we do a clients work. I suppose we can always take larger retainers upfront which is probably half of the solution. However I do often think clients might struggle to make too large of an upfront deposit. Yet on the back end of things my problem has been once the retainer deposit has been used then we’ve been in the habit of simply billing clients for the work done that month. And then we start to have payment problems because we’re totally at the client’s whim. My solution:  Ed mentioned the “evergreen” retainer idea to me being simply a client must always keep some minimum amount in my trust account until the representation is completed. Then if there’s a payment problem I will always have some funds to collect against. I haven’t finalized the amount of the “evergreen” retainers as yet and I think it will vary by the nature of the case…seems like a range might be $250-$750.

• Consider a discount for clients who pay promptly. Here I’m aiming at the same problem as the billing cycle change…simply, getting client payments more quickly. So I’m deciding about what date deadline I’ll use that will qualify a client for a discount & what should the discount be. I’m leaning towards post-marked by the 15th of the month for the date. As for the amount, kind of wavering between a fixed-fee vs. a %. 10% sort of sounds good and would be easy to calculate but that seems too large.

Thoughts??

Well, it’s not quite a death in the family but…

Pulled that quote from this piece at law.com about law firms suing former clients for back fees. ABA Journal had an erely similar article on the same day…and now I’m posting about it. Interesting that one of the law firm’s suing former client allegedly was owed $400,000 in fees.

Who stays in a case where there’s that large of an unpaid bill?

I’m still for the most part following this “collection policy” with my firm. Personally I have never sued a client for fees (with a caveat to come) nor seen it done at the two smallish firms I worked at prior to my current set-up. However, as someone who practices a good amount in cases covered by the Illinois Marriage and Dissolution of Marriage Act, there is a specific section of that Act (508) which allows a former attorney to bring a fee petition against a former client (typically you bring a fee petition immediately after you withdraw). I have used this mechanism and will continue to do so…you get a judgment without the hassle of filing a separate suit.

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The question:  What’s the worst decision you’ve made in your early years in solo practice? The unanimous answer:  UNDER-BILLING…in other words, under-valuing the worth of your legal services. And it kills you for at least 3 reasons:

• If client pays, you’ve cost yourself that difference between what you’re worth versus what you actually billed.
• You’ve lowered the perceived value of your brand…right or wrong the cost of a product or service often equates to it’s perceived value or luxury.

• You often lower your performance expectations (and actual performance) to match your billing rate. Ideally you give the same effort for your best clients and say that pro bono case but I’ve felt the leak of lowered performance that’s hard to totally avoid

That was the subject of one of Chicago Laywer’s Ethics columns recently. I’ve never done this but the article covers some interesting cases and issues. It would be nice if the Rules of Professional Conduct were touched on a bit more. Here’s the general rule apparently:

Generally, when a lawyer takes a deed to a client’s property at the outset of the attorney-client relationship as part of the retainer agreement, and it is understood that the deed is only being held as a lien, and not intended as a conveyance of title, there is no violation of the rules.

I haven’t heard or seen of too many firms doing this but obviously there are cases on the issue that are cited in the article. Personally I’ve only had clients sign-off on agreed Judgment Liens that I’ve then recorded against property to secure a certain amount in legal fees.

The gist of the 4 cases cited seem to break on a) Are you holding the deed as a lien or is an actual conveyance intended; b) Do you take the deed as part of an initial retainer or is this a separate business transaction with a client later on. Generally holding a lien is fine and doing everything up front as part of a retainer agreement is the way to go. The trouble comes when issues about the lien/conveyance aren’t laid out in enough detail and when they’re transacted after the attorney-client relationship has been formed because then your conflict of interest issues arise.